The regulator’s decision to admit that there are “no longer reasonable grounds” to consider Tchenguiz a suspect could leave it with a substantial bill for damages to his business interests.

He has previously signalled his intention to sue the SFO for more than £100m.

“I have consistently explained to the SFO that they had got it completely wrong – but, as their investigation collapsed around their ears, they stubbornly maintained that they regarded me as a suspect,” Tchenguiz said in a statement.

“It is a huge relief that, under the new director of the SFO, this shadow has now been lifted and I can get on with rebuilding my life and my business interests. The damage, however, has still to be accounted for.”

The probe began when brothers Vincent and Robert Tchenguiz were arrested in March 2011 in dawn raids on their homes and offices that were splashed across the news.

The investigation stemmed from the brothers’ dealings with Icelandic bank Kaupthing, which loaned them £180m in March 2008 only to collapse months later.

Regulators had accused Vincent Tchenguiz of duping Kaupthing by overstating the value of the property that he pledged as collateral.

But the case against Vincent began to unravel after he successfully applied for a judicial review of the case in November 2011.

A month later the SFO admitted that there were “factual errors” in information used to obtain the search warrants against Vincent and offered to return some seized documents.

The watchdog confirmed yesterday it had “informed Mr Vincent Tchenguiz that there are now no longer reasonable grounds to consider him a suspect in the investigation into the collapse of Kaupthing Bank.”

It said that the investigation into Robert Tchenguiz remained ongoing.